Image 9.1 General definition of the market

Organization of market

A market can be organized as an auction, as a private electronic market, as a commodity wholesale market, as a shopping center, as a complex institution such as a stock market, and as an informal discussion between two individuals.

Markets of varying types can spontaneously arise whenever a party has interest in a good or service that some other party can provide. Hence there can be a market for cigarettes in correctional facilities, another for chewing gum in a playground, and yet another for contracts for the future delivery of a commodity. There can be black markets, where a good is exchanged illegally and virtual markets, such as eBay, in which buyers and sellers do not physically interact during negotiation. There can also be markets for goods under a command economy despite pressure to repress them.

Questions to UNIT 9

1. W hat is market?

2. What is financial market?

3. What does prediction market mean?

4. What is artificial market?

5. What is the main principal of Internet market?

6. What other kinds of market are there? What are their peculiarities?

Analyze the markets in Ukraine. What type of market is the most wide-developed? Why do you think so? Give the specific data based on the last year results.

UNIT 10 Free Market

A free market is a competitive market where prices are determined by supply and demand. It is primarily found in countries where economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts. Free markets differ from situations encountered in controlled markets or a monopoly, which can introduce price deviations without any changes to supply and demand. Advocates of a free market traditionally consider the term to imply that the means of production is under private and not state control or co-operative ownership. This is the contemporary use of the term "free market" by economists and in popular culture; the term has had other uses historically.

A free-market economy is one within which all markets are unregulated by any parties other than market participants. In its purest form, the government plays a neutral role in its administration and legislation of economic activity, neither limiting it (by regulating industries or protecting them from internal/external market pressures) nor actively promoting it (by owning economic interests or offering subsidies to businesses or R&D – research and development).

The theory holds that within an ideal free market, goods and services are voluntarily exchanged at a price arranged solely by the mutual consent of sellers and buyers. By definition, buyers and sellers do not coerce each other, in the sense that they obtain each other's property rights without the use of physical force, threat of physical force, or fraud, nor are they coerced by a third party (such as by government via transfer payments) and they engage in trade simply because they both consent and believe that what they are getting is worth more than or as much as what they give up. Price is the result of buying and selling decisions as described by the theory of supply and demand.

Free markets contrast sharply with controlled markets or regulated markets, in which governments more actively regulate prices and/or supplies, directly or indirectly, which according to free-market theory causes markets to be less efficient. Where substantial state intervention exists, the market is a mixed economy. Where the state or co-operative association of producers directly manages the economy to achieve stated goals, economic planning is said to be in effect; when economic planning entirely substitutes market activity, the economy is a Command economy.

In the marketplace, the price of a good or service helps communicate consumer demand to producers and thus directs the allocation of resources toward satisfaction of consumers as well as investors. In a free market, the system of prices is the result of a vast number of voluntary transactions, rather than of political decrees as in a controlled market. The freer the market, the more truly the prices will reflect consumer habits and demands, and the more valuable the information in these prices are to all players in the economy. Through free competition between vendors for the provision of products and services, prices tend to decrease, and quality tends to increase. A free market is not to be confused with a perfect market where individuals have perfect information and there is perfect competition.

Questions to UNIT 10

1. W hat is free market?

1. For what countries it is more common?

2. What is the specific of free market economy?

3. What is theory of ideal free market?

1. What is the peculiarity of the means of production in free market?

2. Compare controlled market and free market?

3. Compare the system of price in free market and other types of market.

UNIT 11 Bull and bear market

A Bull market is associated with increasing investor confidence, and increased investing in anticipation of future price increases. A bullish trend in the stock market often begins before the general economy shows clear signs of recovery.

Bull.

An investor who thinks the market, a specific security or an industry will rise. Investors who takes a bull approach will purchase securities under the assumption that they can be sold later at a higher price.

A Bear market is a general decline in the stock market over a period of time. It is a transition from high investor optimism to widespread investor fear and pessimism. According to The Vanguard Group, "While there’s no agreed-upon definition of a bear market, one generally accepted measure is a price decline of 20% or more over at least a two-month period." It is sometimes referred to as "The Heifer Market" due to the paradox with the above subject.

Examples: A bear market followed the Wall Street Crash of 1929 and erased 89% (from 386 to 40) of the Dow Jones Industrial Average's market capitalization by July 1932, marking the start of the Great Depression. After regaining nearly 50% of its losses, a longer bear market from 1937 to 1942 occurred in which the market was again cut in half. Another long-term bear market occurred from about 1973 to 1982, encompassing the 1970s energy crisis and the high unemployment of the early 1980s. Yet another bear market occurred between March 2000 and October 2002. The most recent examples occurred between October 2007 and March 2009.

Bear

An investor who believes that a particular security or market is headed downward. Bears attempt to profit from a decline in prices. Bears are generally pessimistic about the state of a given market.

Example: if an investor were bearish on the S&P 500 they would attempt to profit from a decline in the broad market index. Bearish sentiment can be applied to all types of markets including commodity markets, stock markets and the bond market.

Bear Market

A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20\% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market.

A bear market should not be confused with a correction, which is a short-term trend that has a duration of less than two months. While corrections are often a great place for a value investor to find an entry point, bear markets rarely provide great entry points, as timing the bottom is very difficult to do. Fighting back can be extremely dangerous because it is quite difficult for an investor to make stellar gains during a bear market unless he or she is a short seller.

Questions to UNIT 11

1. W hat is bull market?

2. What is the main principles of bull market?

3. What are the peculiarities of bear market?

4. Who gave the definition of bull and bear market?

UNIT 12 Market Segmentation

The process of defining and subdividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment.

T

Market segmentation

he four basic market segmentation-strategies are based on: behavioral, demographic, psychographic, and geographical differences. General market segmentation is presented on image 27.1.

Service type

Business type

Not regulated

Highly regulated

Moderately regulated

A market segment is a classification of potential private or corporate customers by one or more characteristics, in order to identify groups of customers, which have similar needs and demand similar products and/or services concerning the recognized qualities of these products, e.g. functionality, price, design, etc.

An ideal market segment meets all of the following criteria:

• It is internally homogeneous (potential customers in the same segment prefer the same product qualities).

• It is externally heterogeneous (potential customers from different segments have basically different quality preferences).

• It responds similarly to a market stimulus.

• It can be cost-efficiently reached by market intervention.

A customer is allocated to one market segment by the customer´s individual characteristics. Often cluster analysis and other statistical methods are used to figure out those characteristics, which lead to internally homogeneous and externally heterogeneous market segments.

“Positive” market segmentation

Market segmenting is dividing the market into groups of individual markets with similar wants or needs that a company divides into distinct groups which have distinct needs, wants, behavior or which might want different products & services. Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private. Although industrial market segmentation is quite different from consumer market segmentation, both have similar objectives. All of these methods of segmentation are merely proxies for true segments, which don't always fit into convenient demographic boundaries.

Consumer-based market segmentation can be performed on a product specific basis, to provide a close match between specific products and individuals. However, a number of generic market segment systems also exist, e.g. the system provides a broad segmentation of the population of the United States based on the statistical analysis of household and geodemographic data.

The process of segmentation is distinct from positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritize the groups to address; to understand their behavior; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus improved.

Improved segmentation can lead to significantly improved marketing effectiveness. Distinct segments can have different industry structures and thus have higher or lower attractiveness

Once a market segment has been identified (via segmentation), and targeted (in which the viability of servicing the market intended), the segment is then subject to positioning. Positioning involves ascertaining how a product or a company is perceived in the minds of consumers.

This part of the segmentation process consists of drawing up a perceptual map, which highlights rival goods within one's industry according to perceived quality and price. After the perceptual map has been devised, a firm would consider the marketing communications mix best suited to the product in question.

Questions to UNIT 12

1. G ive the definition to the term market segmentation

2. What is the goal of market segmentation?

3. What are the basic market segmentation strategies?

4. What is market segment?

5. What are the criteria for ideal market segment?

UNIT 13 P market

4 P rule Product, Price , Place Promotion

PRODUCT – the physical features of the product, or the intangible aspects of the servicecovers things you do to make the product more attractive

PLACE: decisions about where to sell the product;

- or concerns about where the customers are, and how to get to them;

- also includes the "channel of distribution"

- meaning, all the different middlemen you use to get the product out to the customer

PRICE - are you going to sell at a high price and make a lot of profit in the short term;

- are you going to sell at a low price to beat the competition and stay in the long term

Promotion:

The specification of five elements creates a promotional mix or promotional plan. These elements are personal selling, advertising, sales promotion, direct marketing, and publicity. A promotional mix specifies how much attention to pay to each of the five subcategories, and how much money to budget for each. A promotional plan can have a wide range of objectives, including: sales increases, new product acceptance, creation of brand equity, positioning, competitive retaliations, or creation of a corporate image. There are three basic objectives of promotion. These are:

1. To present information to consumers as well as others.

2. To increase demand.

3. To differentiate a product.

There are different ways to promote a product in different areas of media. Promoters use internet advertisement, special events, endorsements, and newspapers to advertise their product. Many times with the purchase of a product there is an incentive like discounts, free items, or a contest. This is to increase the sales of a given product.

There are seven main aspects of a promotional mix. These are:

• Advertising - Presentation and promotion of ideas, goods, or services by an identified sponsor. Examples: Print ads, radio, television, billboard, direct mail, brochures and catalogs, signs, in-store displays, posters, motion pictures, Web pages, banner ads, and emails.

• Personal selling - A process of helping and persuading one or more prospects to purchase a good or service or to act on any idea through the use of an oral presentation. Examples: Sales presentations, sales meetings, sales training and incentive programs for intermediary salespeople, samples, and telemarketing. Can be face-to-face or via telephone.

• Sales promotion - Media and non-media marketing communication are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability. Examples: Coupons, sweepstakes, contests, product samples, rebates, tie-ins, self-liquidating premiums, trade shows, trade-ins, and exhibitions.

• Public relations - Paid intimate stimulation of supply for a product, service, or business unit by planting significant news about it or a favorable presentation of it in the media. Examples: Newspaper and magazine articles/reports, TVs and radio presentations, charitable contributions, speeches, issue advertising, and seminars.

• Corporate image - The Image of an organization is a crucial point in marketing. If the reputation of a company is bad, consumers are less willing to buy a product from this company as they would have been, if the company had a good image.

• Direct Marketing is often listed as a the fifth part of the marketing mix